The proposed project will examine the determinants, characteristics, and impacts of strategic management responses by rural hospitals to changes in their environments during the 1980's. Management responses will be studied over the 1983-88 period and will include (1) horizontal integration (particularly linkages with urban hospitals and with other rural hospitals in the service area), (2) vertical integration, (3) diversification (4) divestment/downsizing, (5) staff recruitment, (6) marketing, and (7) efforts to increase efficiency. Environmental changes that will be studied as possible determinants of these responses include implementation of the Medicare Prospective Payment System (PPS), changes in local demographics (e.g., population decline and/or aging), and changes in local economies (e.g., declines in employment). Impacts of the first four categories of management responses on hospitals' economic performance during 1984-87 also will be examined, including impacts on costs, service volumes and financial status. Data on management responses will be obtained from surveys of chief executive officers and chief financial officers in approximately 1000 rural hospitals. Telephone interviews and mailed surveys will be utilized. Descriptive analyses and regression analyses of survey responses will be used to examine impacts of changing environmental factors on management strategies. Regression models of changes in hospital costs, service volumes, and financial status will be estimated with management strategy indicators included as explanatory variables; some variables describing changes in environmental conditions also will be included in these models. Dependent variable data for these regression models will be obtained from Medicare Cost Reports. Data on changes in en- vironmental conditions will be assembled for the period 1980-86. This effort will involve updating and extending a nationwide county-specific data base previously developed by the investigators. The study will provide knowledge about relationships between (1) changes in payment systems and local economic conditions during the 1980's and (2) rural hospital management strategies and economic performance. Evidence about the relative effectiveness of various management strategies may help rural hospitals adapt to their changing environment.